11 May 2011

Group Strategy
Investor Day
Stuart Gulliver Group Chief Executive

Forward-looking statements
This presentation and subsequent discussion may contain certain forward-looking statements with respect to the financial condition, results of operations and business of the Group. These forwardlooking statements represent the Groups expectations or beliefs concerning future events and involve known and unknown risks and uncertainty that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Additional detailed information concerning important factors that could cause actual results to differ materially is available in our Annual Report and Accounts 2010. Past performance cannot be relied on as a guide to future performance. This presentation contains non-GAAP financial information. Reconciliation of non-GAAP financial information to the most directly comparable measures under GAAP are provided in the Reconciliation of reported and underlying profit before tax supplement available at www.hsbc.com.

HSBC heritage and business model

Context

Total shareholder return over the last 16 years

Total shareholder return1
TSR rebased to 100 on 30/12/1994

700 600 500 400 300 200 100 0

HSBC Holdings plc MSCI World Banks Index

+542%

+81%

1995
Outperformance vs. market

2000

2005
Flat vs. market

2010
Resilient in the financial crisis

2011 May

1 Includes capital appreciation and dividends. Calculation is adjusted for equity raisings Source: Thomson Reuters Datastream

HSBC distinctive position

Why should you own HSBC?

Distinctive position aligned with key trends Network of countries relevant 1 for international connectivity Access and exposure to high 2 growth markets and businesses Clear strategy and execution focus
Strategy drives investment priorities and capital allocation

II

Action plan addressing growth and cost efficiency across geographies and businesses

Strong balance sheet generating 3 resilient stream of earnings

Detailed in following section

III

Experienced management team accountable for delivery

HSBC distinctive position

Importance of global connectivity will increase

Imbalances continue to drive capital flows
Net funding gap/surplus2, USDtn, 2020E

Trade will continue to grow

Trade growth1, USDtn

33
8.9% CAGR

US France Brazil

(3.8) (1.2) (0.8) (0.7) (0.3) (0.2)

0.1 0.7 0.7 0.8 1.1 1.5 5.7 8.5
6

14 6

Canada Korea Ireland Russia India Germany Taiwan Hong Kong 2020 UK Japan China

2000

2010

1 Merchandise Exports 2 Positive value means funding surplus, negative value means funding gap Source: Global Insights, McKinsey & Company and World Economic Forum, More Credit with Fewer Crises: Responsibly meeting the Worlds growing demand for credit page 49, exhibit 25: Funding gap or surplus for selected countries, (http://www3.weforum.org/docs/WEF_NR_More_credit_fewer_crises_2011.pdf)

HSBC distinctive position

Trade and capital flows connectivity is concentrated

Cumulative growth in total merchandise export and import, 2010-2020

100% = USD37.1tn

100% 90% 80%

Cumulative growth 35 markets represent 90% growth in trade flows Similar degree of concentration in: External debt, foreign exchange reserves, and current account balances Banking profit growth Foreign direct investment

70% 60% 50% 40% 30% 20% 10% 0%

Number of Markets (total: c.200 markets)

Source: Global Insights

HSBC distinctive position

Rebalancing of the world economy

GDP of top 30 economies

USDtn

106

Largest countries

Share of 2050 GDP1 (%)

57

China India Brazil Mexico Turkey Other 14 emerging US Japan Germany UK France Canada Other 5 developed

20 7 2 2 2 14 18 5 3 3 2 2 4

19 of the top 30 economies in 2050 will be from currently deemed emerging markets

Emerging Markets Developed Markets

37 10
49 27

2010

2050

1 2050 GDP estimated for top 30 countries, 2050 world GDP estimated by assuming top 30 maintain same share of total world GDP as 2010 of 85% Source: HSBC The World in 2050: Quantifying the shift in the global economy

HSBC distinctive position

HSBC has exposure to markets with strong fundamentals driving wealth creation
Income per capita in 2050
USD thousands Multiple over 2010 income

Top economies by 2050

GDP, USDtn

China US India Japan Germany UK Brazil Mexico France Canada Turkey

Source: HSBC The World in 2050

24.6 22.3 8.2 6.4 3.7 3.6 3.0 2.8 2.8 2.3 2.1 5

17 55

7.3x 1.5x 6.4x

63 53 49

1.6x 2.1x 1.8x 2.9x

14 22 41 51 22

3.5x 1.7x 2.0x 4.3x

2.5
9

35

HSBC distinctive position

A well diversified business with ample access to funding and liquidity

with ample access to funding and liquidity
Customer accounts, 31/12/2010, USDm

HSBC has a well diversified business

Distribution of revenues, 20101

Europe (32%) Hong Kong (14%) Rest of Asia Pacific (13%) MENA (3%) North America (24%) Latin America (14%) PFS (44%) CMB (19%) GBM (27%) GPB (4%) Other (6%)

Europe Asia N. America L. America MENA Total

492 456 158 88 34 1,228

One of the largest deposit base in the World2 with an A/D ratio below 80%

1 Intra-HSBC revenue has not been eliminated in the preparation of these charts. Intra-HSBC revenue includes revenue between geographic regions and revenue between customer groups and global businesses. HSBC's Balance Sheet Management business, reported within Global Banking and Markets, provides funding to trading businesses 2 Including Chinese and Japanese banks, HSBC has the 3rd largest deposit franchise

10

HSBC distinctive position

Legacy positions have affected our results

GBM AFS ABS reserve
USDbn1 USDbn2

HSBC Finance Corporation

Consumer loans run-off portfolio,

100.4 91.2 82.2 78.9 68.8 58.4 55.7

(2.2) (5.8)

(6.4) (8.3) (12.2) (8.1)

(18.7)

(17.5)

Dec 2008

Jun Dec Dec 2009 2009 2009 Pre-180 days3

Jun 2010

Dec 2010

Mar 2011

Dec Jun Dec Jun Dec Jun Dec Mar 2007 2008 2008 2009 2009 2010 2010 2011

1 Excludes reverse repo balances 2 Available-for-sale fair value reserve in respect of asset-backed securities 3 Write off period changed from 240 days to 180 days

11

HSBC distinctive position

HSBC has meaningful improvement opportunities

Regulation and capital Requirements

Evolving regulation resulting in higher capital requirements which, in light of continued uncertainty, we assume to be 9.5-10.5% Common Equity Tier 1 under Basel III HSBC can comfortably meet Basel III capital requirements CER of 55% for 2010 (in Q1 2011, 61%, or 55% excluding notable items and FVOD) is well above target range and unacceptable

Common Equity Tier 1 ratio of 9.5% - 10.5% (Basel III)

Efficiency

There is a programme of sustainable cost saves planned to bring cost efficiency within the target range by 2013 ROE of 9.5% for 2010, with some of the assets not delivering the desired target return (e.g., North America) of 12-15% Persistent low interest rate environment impacting profitability

CER target of 48 - 52%

Profitability

ROE target of 12 - 15% (Basel III)

12

Clear strategy and execution focus

Why should you own HSBC?

Distinctive position aligned with key trends Clear strategy and execution focus
Strategy drives investment priorities and capital allocation

Network of countries relevant for international connectivity

Access and exposure to high growth markets and businesses

II

Action plan addressing growth and cost efficiency across geographies and businesses

Strong balance sheet generating resilient stream of earnings

III

Experienced management team accountable for delivery

Detailed in following section

13

Clear strategy and execution focus

To be the leading international bank

This means . . .

Two main elements

International connectivity

Presence in key markets that matter for international connectivity Businesses that are internationally connected: GBM hub-and-spoke model with global reach CMB provides a full range of commercial financial services to companies in 60+ markets Investment opportunities in fast growing and mature markets Wealth creation in most relevant markets (18 key markets) Focus on retail banking only in markets where we can achieve profitable scale: Large scale positions (Hong Kong and UK) High growth markets (e.g., Mexico, Singapore, Turkey, Brazil) Leading market shares in small geographies

Economic development/ wealth creation

Strategy provides a clear framework to review our portfolio and achieve higher discipline in capital allocation

14

Clear strategy and execution focus

Improve capital deployment Five filters

Are the current returns attractive? 3.Profitability 4.Efficiency 5.Liquidity Markets with strong connectivity in CMB and GBM (e.g., Germany) Attractive growth markets (e.g. Turkey, Brazil)

What is the strategic relevance? 1.Connectivity 2.Economic development

Resulting actions

Yes High No

Invest

Large turnaround efforts (e.g. US) Turnaround/ Focus business and improve operational efficiency Improvement (e.g. Increase efficiency in France)

Yes Medium/ Low No

Continue as is

Markets delivering appropriate returns that are not critical to our strategy

Discontinue/ dispose

Disposal and/or closure of non-strategic businesses that cannot be credibly turned around (e.g. Retail Banking in Russia)

15

Clear strategy and execution focus

II

Improve cost efficiency and organisational effectiveness

Approach

Sustainable cost saves

USD2.5-3.5bn of sustainable cost saves targeted over the next 3 years Achieve 48-52% CER by 2013 Sustainable cost saves will facilitate: Growth in key markets Investment in new products, processes and technology Provide buffer against regulatory and inflationary headwinds Positive jaws

Implement Consistent Business Models

Re-engineer Global Functions

3
Re-engineer Processes Streamline IT

16

Clear strategy and execution focus

II

Global Banking and Markets (GBM)

Emerging markets-led, financing focused with greater emphasis on connectivity GBM key financials PBT, USDbn Total PBT07-10: USD29.6bn
6.1 3.5 10.5 9.5

Position

Business built organically and run as a global business Reached new base level of USD9-10bn in 2009/10 with additional upside for growth Strong emphasis on connecting faster growing markets, in particular with Europe
Strategic actions

2007 2010 Metrics CER: 50%

08

09

2010

RWAs: USD358bn RoRWA: 2.5%

Improve client coverage (e.g., selective hiring) Enhance core product strengths (e.g., FX, commodities) and selectively develop new capabilities (e.g., equities) Increase penetration of product solutions into broader customer base (e.g., USD1bn of incremental revenue from CMB customer base) Achieve sustainable cost saves (e.g., integrate technology trading platforms)
17

Clear strategy and execution focus

II

Commercial Banking (CMB)

Strengthen our position as the leading international trade and business bank CMB key financials PBT, USDbn Total PBT07-10: USD24.7bn
7.1 7.2 4.3 6.1

Position

Heritage of the Group in international trade Organic growth since the Groups foundation Present in 60+ markets

Strategic actions

2007 2010 Metrics CER: 49%

08

09

2010

Expand presence in key faster growing markets Capture growth in International SMEs leveraging network, capabilities and scale Collaborate with GBM to capture Mid-market opportunity in FX, derivatives and Global Capital Financing

RWAs: USD322bn RoRWA: 2.0%

18

Clear strategy and execution focus

II

Retail Banking and Wealth Management (RBWM)

World class banking and wealth solutions PFS key historical financials (going forward RBWM1) PBT, USDbn Total PBT07-10: USD-3.7bn Position Global propositions: Premier and Advance Top 15 markets concentrate majority of profits Strategic actions Wealth Management Develop world class wealth management for retail consumers focusing on 18 key markets (USD4bn in additional revenues) Build sustainable non funds income Up-skill RMs, invest in product platform and deepen client relationships Retail Banking Grow retail banking in key markets where we have or can achieve scale (e.g., Mexico, Turkey) Standardise banking propositions and operating models to reduce complexity Portfolio Management Exit sub-scale markets (e.g., Retail Banking in Russia)
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5.9

3.5 -2.1 -11.0 08

2007 2010 Metrics CER: 58%

09

2010

RWAs: USD361bn RoRWA: 1.0%

1 Does not include Global Asset Management

Clear strategy and execution focus

II

Global Private Banking (GPB)

Become the worlds leading international private bank GPB key financials PBT, USDbn Total PBT07-10: USD5.1bn Position

1.5

1.4

1.1

1.1

Well established footprint and in most attractive growth markets, particularly Asia Efficient platform to deliver full range of solutions Vigorous actions taken to address data security issues

Strategic actions 2007 2010 Metrics CER: 66% RWAs: USD25bn RoRWA: 4.0% 08 09 2010

Focus on domestic and the faster growing markets in Asia, Middle East and Latin America as legacy offshore business becomes less relevant Leverage intra-group connectivity (RBWM feeder, CMB referrals, GBM partnership) Grow annuity revenues and invest in platform for improved efficiency

20

Clear strategy and execution focus

II

North America

To build an internationally connected, sustainable business model, aligned with overall group strategy
Strategic market Present Not present

North America

In the US, explore other options to reallocate capital: Finance business in run-off except for cards Cards and Retail Services (USD33bn in customer loans) Part of the branch network (currently total of 475 branches) Invest in network in internationally connected areas Capture internationalisation opportunity for small and mid-market US companies Strengthen New York as GBM hub for the Americas Strong Canadian franchise focused on international connectivity generating USD0.9bn PBT in 2010

North America 2010 PBT USD0.5bn CER 49% RWAs USD331bn RoRWA 0.1%
21

Clear strategy and execution focus

II

Latin America

Becoming the leading international bank serving key growth segments and markets
Strategic market Present Not present

Latin America

Position to capture social mobility and wealth creation opportunity Organic growth in Brazil, Mexico and Argentina Review opportunities to reallocate capital from less strategic and underperforming businesses Leverage CMB and GBM competitive strength across the region Costs efficiency and delayering

Latin America 2010 PBT USD1.8bn CER 66% RWAs USD96bn RoRWA 2.0%
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Clear strategy and execution focus

II

Europe

Be the leading international bank connecting Europe

UK
Strategic market Present Not present

Continue to develop Wealth Management through Premier, Advance and other key products, e.g., mortgages Be the UKs leading bank for international businesses Evaluate the impact of ICB: potential ringfencing of retail operations
Continental Europe

Europe 2010 PBT USD4.3bn CER 68% RWAs USD302bn RoRWA 1.3%

Restructure sub-scale continental European operations (e.g., Retail Banking in Russia) Focus mature European markets on connectivity France: Accelerate Wealth Management strategy, while reducing costs and increase role of Paris as a GBM hub Germany: Focus on large internationally connected corporates, taking advantage of German business momentum Turkey: Capture growth opportunities in Retail and CMB
23

Clear strategy and execution focus

II

Middle East and North Africa

The leading international bank connecting Middle East and North Africa with the rest of the world and capturing its wealth opportunity

Middle East and North Africa

Align coverage of both individuals and corporates to capture trickledown of wealth Leverage regional and global footprint to capture East-to-East trade flows and FDI opportunities Maintain leadership in Islamic Finance products

Strategic market Present Not present

MENA 2010 PBT USD0.9bn CER 45% RWAs USD54bn RoRWA 1.6%

24

Clear strategy and execution focus

II

Asia

Connecting Asia and the world

Greater China
Strategic market Present Not present

Maintain leadership in Hong Kong Continued leadership as Chinas top foreign bank Be the leading international bank for RMB worldwide Build on historic success of investment in associates and expand successful strategic partnership with BoCom Pursue Shanghai listing

India

Continue to capture strong growth in GBM and CMB (PBT grew 3x from 2005-2010) Continue to expand distribution to capture the retail opportunity e.g., RBS acquisition1
Other Markets

Asia 2010 PBT CER RWAs RoRWA

USD11.6bn 49% USD324bn 3.8%

Invest for growth in further key markets: Singapore, Malaysia and Indonesia Focus resources selectively in other markets to maintain leadership in connectivity
1 Subject to Regulatory approval

25

Clear strategy and execution focus

III

Experienced Management team

Group management board

Sandy Flockhart Chairman EMEA, Latin America and Commercial Banking Alan Keir Commercial Banking Iain Mackay Group Finance Director Samir Assaf Global Banking and Markets

Paul Thurston Retail Banking and Wealth Management

Niall Booker North America

Emilson Alonso Latin America and Caribbean

Brian Robertson Europe

Peter Wong Asia

Marc Moses Risk

Ann Almeida Human Resources

Richard Bennett Legal

26

Clear strategy and execution focus

III

Experienced Management team

Other management members

Muhammad Al Tuwaijri

Peter Boyles

Pat Burke

Simon Cooper

John Coverdale

Christophe de Backer

Irene Dorner

Conrado Engel

John Flint

David Fried

Joe Garner

Naina Kidwai

Mark McCombe

Chris Meares

Sean OSullivan

Luis Pena

Russell Picot

Andreas Schmitz

Team with strong values: Leading with courageous integrity

Antonio Simes Sandra Stuart Helen Wong
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In summary
Distinctive position Clear strategy and execution focus
Strategy drives investment priorities and capital allocation

Network of countries relevant for international connectivity

Access and exposure to high growth markets and businesses

Action plan addressing growth and cost efficiency across geographies and businesses

Strong balance sheet generating resilient stream of earnings

Experienced management team accountable for delivery

28

Report card
Key execution elements Actions (examples) Five filters driving disposals and closures of non-strategic and/or underperforming positions/businesses Turnaround of strategically relevant businesses In 12 months progress on1. . . Transactions announced and executed Tangible progress in turnaround actions (e.g., US)

Capital Deployment

Cost efficiency

Material savings Target USD2.5-3.5bn in sustainable identified and being cost saves in 3 years, achieving our 48delivered across the 4 52% CER target by 2013 main programmes Simplify and delayer the organisation Revenue growth in fast growing markets Capture wealth opportunity (USD4bn in additional revenues) Leverage intra-group connectivity between CMB and GBM (USD1bn of additional revenues) Income growth particularly in Asia and Latin America Wealth and GBM/CMB connectivity
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Growth

1 From 11 May 2011

Basis of preparation (1/2)

Actuals AMG Actual numbers presented are on a reported basis and include the effect of movements in the fair value of HSBCs own debt related to credit spreads The Global Asset Management business formed part of GBM in 2010, but has been included in RBWM for the RoRWA targets. Comparative data will be presented to reflect this reclassification in the Interim Report 2011 Data for Asia comprises the sum of reported figures for the Hong Kong and Rest of Asia-Pacific geographical regions without the elimination of inter-segment items No changes to the composition of the Group have been assumed other than those described in this presentation Financial targets are prepared on the basis of the Groups accounting policies as set out in the Annual Report and Accounts 2010, and on the basis of tax rates and laws enacted or substantively enacted as at 31 December 2010. The potential effects on HSBCs operations and performance of the Dodd-Frank Act in the US, the deliberations of the UK Independent Commission on Banking, and a range of evolving regulatory changes which may or may not affect HSBC have not been included in the targets The main items reported under Other are certain property activities, the estimated impact of the UK bank levy, unallocated investment activities, centrally held investment companies, gains arising from the dilution of interests in associates, movements in the fair value of own debt designated at fair value (the remainder of the Groups gain on own debt is included in GBM) and HSBCs holding company and financing operations. The results also include net interest earned on free capital held centrally, operating costs incurred by the head office operations in providing stewardship and central management services to HSBC, and costs incurred by the Group Service Centres and Shared Service Organisations and associated recoveries
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Asia Composition of the Group Financial targets

Other

Basis of preparation (2/2)

RoE RoRWA Return on equity (RoE) is profit attributable to ordinary shareholders of the parent company divided by average ordinary shareholders equity The metric, return on risk weighted assets (RoRWA), is the profit before tax divided by average RWAs. The RWAs have been calculated using FSA rules for the 2010 metrics. The regional and customer group targets are adjusted for Basel 3 rules specific to the GBM business. In all cases, RWAs or financial metrics based on RWAs for geographical segments or customer groups are on a third party basis and exclude intraHSBC exposures

RoRWA target for The Europe RoRWA target includes the Groups head office costs, intra-HSBC recharges and the total Europe estimated impact of the UK bank levy RoRWA target for No RoRWA target has been set for the Other customer group as it is not considered to be a meaningful Other measure in terms of performance assessment and resource allocation RWAs for the mainland China associates RWAs for the mainland China associates have been reallocated from the Other customer group to RBWM, CMB and GBM to align better with the basis for the allocation of their profits. This represents a reclassification from the basis used in HSBCs 2010 Pillar 3 Disclosures. Comparative customer group RWAs will be presented on the new basis in the Interim Report 2011

31

Acronyms and definitions

A/D ratio Advance AFS AMG APS ASEAN ASP AUM BoCom bps BSM CAGR CER Ratio of customer advances to customer deposits HSBC Advance, a global banking proposition for the mass-affluent segment of customers Available for sale Global Asset Management Asset Protection Scheme The Association of South East Asian Nations Asia-Pacific Assets under management Bank of Communications Co., Limited, mainland Chinas fourth largest bank by market capitalisation Basis points (a basis point is 1/100 of a percentage point) Balance Sheet Management, a division of Global Banking and Markets Compound annual growth rate The cost efficiency ratio is total operating expenses divided by net operating income before loan impairment charges and other credit risk provisions Swiss franc Commercial Banking customer group Consumer and Mortgage Lending Centres of excellence ETF EU FCA FDI FIG FPC FRB FSA FSB FVOD FX GBM GDP GPB GTB HK HNWI HSS ICB IPO IT KYC LC LIC M&A Mainland China MENA MLA MMEs NAFTA NNM Exchange traded funds European Union UK Financial Conduct Authority Foreign direct investment Financial Institutions Group UK Financial Policy Committee Federal Reserve Board Financial Services Authority Financial Stability Board Fair value of own debt related to credit spreads Foreign exchange Global Banking and Markets global business Gross Domestic Product Global Private Banking global business Global Transaction Banking Hong Kong Special Administrative Region of the Peoples Republic of China High net worth individuals HSBC Securities Services Independent Commission on Banking Initial public offering Information technology Know your customer Letters of credit Loan impairment charges Mergers and acquisitions Peoples Republic of China excluding Hong Kong Middle East and North Africa Mandated lead arranger Mid-market enterprises North American Free Trade Agreement Net new money YoY RMs RMB ROE RoRWA RWAs SIFIs SMEs STP TARP NYSE OCC OTC PBT PCM PFS PPI PRA Premier RBWM New York Stock Exchange Office of the Comptroller of Currency Over the counter Profit before tax Payment and Cash Management, a division of Global Banking and Markets Personal Financial Services Payment protection insurance UK Prudential Regulation Authority HSBCs premium global banking service Retail Banking and Wealth Management global business, which comprises the existing Personal Financial Services customer group and Global Asset Management Relationship managers Renminbi Return on equity Pre-tax return on risk weighted assets Risk weighted assets Systemically Important Financial Institutions Small and medium-sized enterprises Straight through processing Troubled Asset Relief Program

CHF CMB CML CoEs

Core Tier 1 The highest quality form of regulatory capital that capital comprises total shareholders equity and related noncontrolling interests, less goodwill and intangible assets and certain other regulatory adjustments CRD Capital Requirements Directive CRM CVA DCM DTA EBA ECA EM EMEA ESMA Customer relationship management Credit valuation adjustment Debt capital markets Deferred tax asset European Banking Authority Export credit agency Emerging markets Europe, Middle East and Africa European Securities and Markets Authority

Tier 2 capital A component of regulatory capital, comprising qualifying subordinated loan capital, related non-controlling interests, allowable collective impairment allowances and unrealised gains arising on the fair valuation of equity instruments held as available-for-sale. Tier 2 capital also includes reserves arising from the revaluation of properties UHNW Ultra high net worth individuals UK US VaR United Kingdom United States of America Value at risk: a measure of the loss that could occur on risk positions as a result of adverse movements in market risk factors (e.g. rates, prices, volatilities) over a specified time horizon and to a given level of confidence Year on year

32